Denmark's housing slump to finish at the end of this year, S&P analyst says

Denmark's housing slump is nearing its end as the excesses of the nation's property boom fade and the gap between people's earnings and the price of a home narrows, an analyst has claimed.

"We think the bulk of the adjustment process, of needing to sort out what had obviously been excesses, that this will potentially be completed by the end of this year," said Standard & Poor's analyst Per Tornqvist. "So we are close to the end of the adjustment process."

Home prices have plunged about 25 per cent since a 2007 peak, and declines this year will average 3.5 per cent, the government estimates. The housing crisis, combined with rising job losses, has suffocated demand and pushed the economy to the brink of its second recession in less than a year. Any recovery in Denmark's housing market is likely to be gradual, S&P estimates.

"There are some signs of improvement, though we do not expect a rapid turnaround," Tornqvist said. "The problem with a high private debt burden is that it is a very long-term trend to change the leverage in society. You're almost looking at a multi-decade process, certainly a process that can last a decade."

Gross domestic product sank 0.5 per cent in the second quarter compared to the first, and contracted at an annual rate of 0.9 per cent. The slump was led by a 4.2 per cent decline in business investments and a 0.9 per cent fall in consumer spending.

Danes have the largest household debt burdens in the world, relative to income. Indebtedness was 322 per cent of disposable incomes in 2010, S&P estimates.